BasicNet VP Lorenzo Boglione talks strategy, economics and new projects for 2022
The Italian group BasicNet will open its "Basic Village" on September 21 in Milan, during the fashion week. It will be a 4,500-square-meter space with offices, showroom, restaurant, commercial areas and lofts. FashionNetwork.com took this opportunity to meet with the vice-president of the Turin-based company, Lorenzo Boglione, who is also the executive director of the French label K-Way, to take stock of the current market situation and of the group, which also owns the brands Kappa, Superga and Sebago.
FashionNetwork.com: Why open this space in Milan and how much have you invested?
Lorenzo Boglione: Just over 25 years ago we opened a Basic Village in Turin, which houses our headquarters and all sorts of activities open to the public. The idea was to replicate this concept elsewhere. This will allow us to set up our showroom in Milan and a large space for organizing events, but also offices, which we lacked in this city. Between the acquisition of the building and its renovation, we invested between 15 and 20 million euros.
FNW: How is the current year going for your group?
LB: The first six months of 2022 have been excellent, both in terms of sales and profitability, with a consolidated turnover of more than 162 million, up 26%, and a net profit that has more than doubled, to 10.7 million. Considering that the first half of 2021 was still strongly affected by the pandemic, with numerous shop closures. The second half of the year should still be positive, but certain geopolitical factors are not making things easier.
FNW: Are you penalized by the increase in the cost of raw materials?
LB: The increase in the price of raw materials is important, but it has less of an impact on us because of our business model, which is essentially based on licenses. We own eight mainly sporty and casual clothing brands (Kappa, Robe di Kappa, K-Way, Jesus Jeans, K-Way, Superga, Sabelt, Briko and Sebago), for which we manage the style, research, development and global marketing from our headquarters in Turin, while the production of the collections and the distribution, except for Italy, are delegated to licensees. We produce mainly in Asia or in the Mediterranean therefore we are much more affected by the rise of the dollar than Italian producers.
FNW: What does that mean?
LB: For us, the weakness of the euro is a problem because raw materials and goods are bought in dollars and resold in dollars by our licensees, suppliers and distributors. In addition to the inflation, our business has therefore had an additional cost of almost 10% due to the rise of the dollar. We are in a very delicate situation, where we have to understand how the market will evolve. And the complexity is likely to increase over the next twelve months. I don't know how long these price increases will be sustainable for consumers.
FNW: You recently took over the direct operations of K-Way. Why?
LB: In 2019 Kappa in France, Spain and Portugal was also taken under our control. Europe is definitely an important part of our business. It represents an increasingly unique market. The more we can manage it in an integrated way, the more efficient we become.
FNW: But you are continuing with your licensing business model?
LB: Yes, this licensing business model has proven to be the best suited to our business. It has also allowed us to better adapt to crises. It helped us particularly at the beginning of the pandemic and it has allowed us to accelerate quickly in the post-pandemic recovery.
FNW: Have you been penalized by the sanctions against Russia?
LB: In Russia we have a license agreement with a major distributor. Our products continue to be sold there because we do not export them directly and therefore they are not subject to the European sanctions. Our licensee buys the products from suppliers outside Europe, which he sells directly in Russia. Then he pays us royalties. This is one of the advantages of our licensing model.
FNW: What are your other main markets?
LB: That depends on the brand. Our two main markets after Europe are the United States and Asia. But locally we also have a very large market in Argentina for K-Way, and in South Africa for K-Way and Superga. Australia is also growing rapidly, mainly for Superga, but also Sebago and K-Way.
FNW: Have you invested a lot in K-Way over the last few years?
LB: Let's say it's the brand that has had the most visibility lately, especially in Europe. We have invested heavily. In particular in France, where K-Way has had a lot of success and is expanding very strongly with new stores opening all the time. The label already has almost 40 stores in France. We also have very ambitious plans in China with two upcoming openings in mainland China and one in Hong Kong.
FNW: What are your other priorities?
LB: We are investing heavily in the relaunch of Sebago, one of the latest brands acquired in 2017. Superga also remains very important. As for Kappa, it remains by far our most important brand. It represents 65-70% of our total sales. In some countries, its sales exceed those of K-Way worldwide. It is a truly global brand.
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